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Phoney war looms as O2 linked with T-Mobile bid

It looks as though Telefonica's O2 may take on Vodafone and Orange in the battle for T-Mobile...

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Published: 02 Jul 2009

Last Updated: 31 Aug 2010

O2, the UK mobile operator owned by Spanish company Telefonica, is mulling a bid for smaller rival T-Mobile, according to today’s papers. With reports also suggesting that Vodafone is interested in buying the business, and Orange owner France Telecom supposedly plotting some kind of joint venture, that means all three of the UK’s top mobile operators are keen to muscle in – increasing the likelihood of a bidding war. Not bad for a £3bn-valued company that’s loss-making, a distant fourth in its marketplace and apparently unwanted by its German owner...

Of course we shouldn’t forget that T-Mobile isn’t officially for sale. Although German owner Deutsche Telekom could be forgiven for wanting to cut its losses, after failing to make a profit in the UK for years, it has just appointed Richard Moat as the company’s new CEO – and DT boss Rene Obermann has previously hinted that Moat should be given a chance to work some magic. Then again, it seems to be an open secret that JP Morgan has been appointed to assess T-Mobile’s options, which apparently involves sniffing out interest from potential buyers. Presumably DT is hoping for an offer it can’t refuse.

You can see why O2 would want to get involved. In the last couple of years it’s established itself as the UK market leader with a 27% share, thanks in no small part to its astute deal with Apple to be the sole supplier of the all-conquering iPhone. But if Vodafone succeeds in swallowing up T-Mobile – and apparently it’s poring over the books as we speak – it will boost its market share to 40%, thus relegating O2 to a distant second place. The same goes for France Telecom-owned Orange, currently the third-biggest player; apparently it’s been sniffing around for months, and its parent company is now contemplating some kind of Orange/ T-Mobile joint venture.

All of which is ringtones to the ears of Deutsche Telekom – although there’s still the thorny problem (which all three operators would have) of getting the deal past the competition regulators. The hope is that the existence of a precedent in France, Italy and Spain would oil the wheels – while there’s also a chance that the authorities would look kindly on a deal if it guaranteed more investment in the UK’s creaking mobile infrastructure. Unless that happens, the benefits to customers are likely to be negligible either way.